A Permanent Account Number (PAN) card is the most crucial document to secure your financial transactions. 

It’s a unique identification number assigned to you by the Income Tax Department of India.

The primary purpose of a PAN number is to hold all your financial information in one place. It’s easier to keep track of your bank accounts, credit/debit cards, loans, taxation, and investments with a PAN number.

You can apply for a PAN card or modify an existing one online. Follow the below steps to complete the application.

Online Pan Card Application Steps

To get a PAN card, you will need to submit an application to an NSDL PAN portal.

Online procedure is rather quick and easy. You can complete the application from the comfort of your home. Follow the steps below to get a new or modify the existing PAN card online.

Step 1: PAN Card Application Form 49A

Visit the official NSDL website to fill out the application. (Here.) Select the application type as per your requirements- new or modifying the existing one.

For the sake of example, we are applying for a new pan card.

Select the category of your application from the given options. If you are applying for yourself, select INDIVIDUAL or go with the suitable category.

Tip- Keep saving all the changes you make, so that you won’t lose any details. 

Next up, fill up your personal information. Let’s take the example of James Bond’s PAN card application. 

Once you fill-up the necessary details, check the terms and conditions box, enter the captcha and ‘Submit’ the application.

Step 2: PAN Card Application With Token

After submitting the form, you will receive a token to use for your application.

Step 3: KYC and Necessary Document Submission

As you continue with the application, you will be asked to provide KYC details, your Aadhaar number, and further personal details.

Read each instruction carefully before you fill out the form.

If you select e-KYC, your photograph will be fetched from the Aadhaar. If you want to submit a different passport-sized photograph, select the second option ‘Submit scanned image through e-Sign’.

For now, let’s go with e-KYC.

If you are applying as an individual, you will be asked to fill up your parents’ information.

Step 4: Communication Details and Income Details

Select your source of income from the provided options. 

Enter the office or home address and confirm your communication details before going ahead. 

Step 5: Assessing Officer Code 

In the next step, you will need to fill up the area details to determine the tax laws applicable to you. See the AO code search for Pan guidelines here.

If you don’t have the area code and AO type information, select the suitable options given below.  

Let’s say James Bond is an Indian Citizen who happens to live in Pune.

After selecting the area, you will see a list of income tax offices in the area.

To choose the office, read the additional description written next to the office. Depending on your residential/office address, select the appropriate option.

Click ‘Next’.

Step 5: Document Submission

In this step, you will see a drop-down menu to select proof documents for identity, address, and date of birth. You can choose to go by Aadhaar details or select different documents as per your convenience. 

If you select different documents, you will see an option below the declaration to upload and submit chosen documents.

Once you have all the document details ready, click on the Submit button.

Final Step- Confirmation and Payment

As you click Submit, you will be redirected to the final step where you cross-check all the information filled during the previous steps. 

Make sure you have entered the correct details. If not, you can go back to fix it. If yes, you can confirm and proceed.

You will need to complete the KYC and Verification process with your Aadhaar number via OTP sent to your mobile number.

The last step is to pay the fees for the application via any online payment method.

Your application will be complete after the payment process. You will get the entire application in the form of a PDF.

If you selected the option of the physical card, you will receive it at the address mentioned on the application.

For any queries, reach out to us anytime. 

Tax on your annual income is as annoying as pineapples on Pizza, right?

Trust us, we hear you. 

You can pick those annoying pizza toppings and save yourself from misery. Similarly, you can save a ton of tax if you know where to invest. 

As much as you might dislike it, you gotta do the taxes. 

Don’t worry though. Our team has shortlisted some popular and useful tax-saving instruments. So get a pen and paper and note down beneficial investment avenues for you.

Let’s save some tax, shall we?

7 Tax Saving Instruments For Investors

1. ELSS Mutual Funds

Equity Linked Saving Scheme is one of the popular tax-saving instruments among investors. Not only can you save tax but also earn some decent returns over the investment horizon.

Fund houses invest at least 80% of total assets into equity or equity-related instruments. You can invest any amount in ELSS funds. However, you are only eligible to get tax deductions on a maximum of 1.5 lakhs of the total invested amount. 

On top of that, you can also get tax benefits on long-term capital gains of less than 1 lakhs. 

2. Public Provident Fund (PPF)

PPF is another popular investment avenue among Indian households as it’s a government-backed fixed-income scheme. You can build wealth over the years and save tax on the PPF amount.

You can create a PPF account in a bank or in a post office depending on your convenience. Government announces the interest rate on PPF each year which remains the same for that year. 

You can invest from Rs. 500 to 1.5 Lakhs in a financial year to get tax exemption under section 80C of the IT Act. The interest earned is also exempt from tax.

Though the lock-in period for the PPF amount is 15 years, you can withdraw the partial amount in 5-year intervals or get a loan against that amount. Read more about PPF here.

3. Tax Saver Fixed Deposit

Tax Saver Fixed Deposit is a tax-saving FD under section 80C of the IT Act with a lock-in period of 5 years. Individual or joint account holders can create this FD to get tax benefits. 

For joint accounts, only the first holder is eligible for tax benefits. 

If you are planning to create FD, go with a tax saver FD scheme. Please note that any premature withdrawals may compromise your tax benefits. Read the scheme terms carefully before creating the FD.

4. National Pension System

Post-retirement financial security is one of the important decisions one has to make. If you already don’t have a retirement plan, you must create one to safeguard your future.

National Pension System/Scheme can be beneficial for you to build retirement funds and save taxes. It’s a systematic investment policy where both employees and employers can invest funds. You can save tax on up to 1.5 lakhs of the total amount under section 80C of the IT Act. 

Additional Tax Benefits Over and Above 80C: Salaried employees can also save tax on up to 50,000 under section 80CCD(1B) of an IT act. Employees become eligible to get tax exemption by investing up to 10% of their salary into NPS. Self-Employees can get tax benefits of an additional 50,000 under 80CCD(1B) by investing 20% of their annual gross income.

5. National Savings Certificate

Similar to PPF, NSC is also the safest investment where you can earn interest and gain tax benefits. 

NSC is a fixed-income investment scheme available to purchase at any post office branch. With 5 years lock-in period, it offers returns nearly similar to FDs. 

You have to invest atleast 1000 in NSC. Though there is no maximum investment amount threshold, you can only get tax exemption on up to 1.5 lakhs under 80C of the IT Act.

6. Insurance Premium

Individuals who have purchased life insurance are eligible for tax exemption of up to 1.5 lakhs of the total premium paid under section 80C of the IT act. 

The amount on maturity or the amount the nominee gets after the passing of the policyholder is also tax-free.

If you are also paying for your family’s and parent’s health insurance, then you are eligible for tax benefits under section 80D of an IT act. 

Here’s how it works:

Healthcare Insurance Covered Individuals	Yourself + Spouse + Children	Your Parents	Total Tax Exemption Under 80c
Yourself, spouse, children (< age 60) + parents (< age 60)	25,000	25,000	50,000
Yourself, spouse, children (< age 60) + parents (> age 60)	25,000	50,000	75,000
All covered individuals (> age 60)	50,000	50,000	1,00,000

7. Senior Citizen Savings Scheme

As the name suggests, the scheme is beneficial for senior citizens. By investing up to 15 lakhs in SCS policy, senior citizens can get tax exemptions of up to 1.5 lakhs. 

The eligibility criteria for the SCSS:

• Citizens aged 60 and above
• Citizens aged above 55 who have voluntarily retired
• Employees of the defense sector of India aged above 50

The Central Government of India determines the interest rate on the SCS scheme, making it safer to invest in.

Conclusion

Section 80C of the IT act is the most popular tax-saving act. Any one or a combination of the options mentioned above can help you get tax exemption on up to 1.5 lakhs in a financial year.

For working individuals, we would recommend ELSS mutual funds or PPF. Starting an ELSS SIP can help you build wealth as well as save tax. 

PPF has some great advantages as you gradually save for a longer duration. It offers a higher interest rate than FD or saving account.

Choose what fits best for your financial goals. Or you can always reach out to our advisors for more guidance and portfolio analysis.

Gone are the days when financial planning was the responsibility of a man. Now women are equally financially stable and independent. 

Whether as homemakers, self-employed women, or working professionals, women are becoming increasingly astute in financial planning. Although earning income is a part of financial independence, real stability comes through money management.

Financial planning, in reality, is beyond saving a chunk of monthly salary. It is also about having a long-term wealth goal for a secure future.

Women often plan everything ahead of time. It’s time to now create a plan for financial stability and security. 

Here are some tips to help you achieve your financial goals;

Top 10 Financial Planning Tips For Women

1. Plan Long-Term Goals For Your Retirement

You must already be saving a percentage of your salary each month. That’s good, but that won’t be enough.

Various studies have proved that women live longer than men. And, women’s work-life span is shorter.

We have often come across people who only plan to build wealth until they are, say, 78-80 years old. But what if you live longer than that? What will you do for the next 10 or possibly more years without proper financial planning?

Additionally, women face various challenges in their professional lives. Many women give up their jobs to look after their house and children. On top of that, women often have a lower pay structure than their counterparts. 

As unfair as it sounds, women have fewer resources and less time to build wealth. However, overcoming hurdles and having a secure financial life is achievable. 

You can start building wealth for your retirement by investing early. Allow yourself to think for a longer term. We would suggest adding 10 more years to your retirement savings goals. 

2. Stay Involved in Your Family’s Financial Planning

This is one of the most important tips we would give to all the women out there. Stay involved and stay aware of all your family’s financial planning. We cannot stress this enough.

Even if your husband is responsible for financial planning, you should also have a fair share of thoughts and knowledge.

Sudden circumstances such as the death of the partner or divorce may cause women to trip over finances. Now, who would manage everything? What about that car loan EMI? Or the home loan instalment? And there could be more.

At VNN Wealth, we have come across many women who had no idea about finances after losing their spouse. We have seen women struggle to manage sudden changes in life. While we were able to help them, we would suggest taking the necessary steps to be prepared.

To avoid stumbling across uncertainties in life, always stay on top of all your family’s finances. 

3. Save Every Month Via SIPs

Although women have great money-saving skills, they don’t invest as often. As said above, saving is not enough. You must actively invest too. 

SIPs are the best and easiest way to start building wealth for you and your family. You can invest a small amount of money each month in equity or debt mutual funds. Even INR. 500/month can make a huge difference in the long run. 

Additionally, mutual funds via SIP with compounding interest can exponentially boost your return.

If you already have an investment portfolio, get it reviewed to receive personalized investment tips. VNN Wealth provides complimentary portfolio reviews and our advisors can also help you create and build a portfolio from scratch. 

You may also like- Top 5 benefits of SIP.

4. Invest in Paper Assets Instead of Physical Gold

We Indians have always been buying gold jewellery as an investment for rainy days. But we are also sentimental about the jewellery. Who would want to sell those beautiful earrings that your mother gave you on your wedding day, right?

Understandable! But not so much reliable.

Instead, invest in Gold ETF. Not only will you save making charges but it’s easier to sell too. No sentiments attached is a plus point. 

5. Keep Track of Expenses and Taxes

Expenses come and go as they please. You wouldn’t know where all your money went without keeping a track of it.

Create categories of expenses and assign a budget for each category. Cut down on unnecessary expenses and maintain an expense sheet. It will help you stay within an assigned budget, but will also help you file taxes.

Taxes are both tricky and fascinating. You can save a lot of money with an effective filing of taxes. You can also invest in various tax-saving instruments to save more tax.

6. Separate Financial Support For Your Family

Family emergencies can knock at your door anytime. You may need to arrange money or break your fixed deposits for your family’s well-being.

Keep different investments for you and your family. Take your family and children’s future into consideration. You may want to create separate savings for your family’s healthcare, children’s education, and your own well-being. 

Don’t sell your retirement funds or personal investments sooner than you had planned. The biggest mistake people often make is the early withdrawal of funds. Not only does it shake up your portfolio, but you will also lose potential returns on those funds. 

Instead, build separate financial support for your family. Don’t sell your funds in a panic.

7. Don’t Forget About Expenses During Your Old Age

Today, you are doing everything in your household. Tomorrow, you might not be able to do it.

Old age can cause quite a few difficulties. You may need to hire a househelp or a full-time attendant. You might not have as much energy or health as you have right now. Expenses in your old age might cause a solid dent in your savings if you are not prepared. 

Always plan ahead of time for such expenses for your family and yourself. 

8. Health Insurance Plan 

Many companies often provide health insurance to employees and you may already have it. However, we would advise you to also buy an external health insurance plan for you and your family. It’ll help you cover medical expenses without burdening your savings.

Many health insurance companies offer better coverage if you buy it early in your life. 

While buying health insurance, don’t forget to get life insurance. Be sure to include critical illness or disability in your life insurance as an added support to your health insurance.

You can also opt for whole-life insurance coverage to provide financial support to your spouse. That way, your surviving spouse gets a payout.

9. Re-Evaluate Your Financial Plan Periodically

The expenses you have today may change in a few years. Expenses after getting married, having children, and growing older will be different and probably dramatic.

By re-evaluating your financial plan, you will be able to consider newly added expenses. Update your investment portfolio accordingly.

10. Quick Money Saving Tips

• Evaluate your money-spending habits to cut down on unnecessary expenses.
• Unsubscribe to online/offline services that you don’t need anymore.
• Keep track of your credit card payments, EMIs, and loan installments. 
• Use your credit card benefits and rewards to save more on each purchase.
• Set a spending limit on your debit/credit cards.
• Be vocal about your financial goals with your spouse/family, so you can align your goals. 
• You can also consider hiring a financial advisor for your family. Here’s how to choose the right financial advisor. 

Plan Your Finances Today!

Have you ever seen your mother or grandmother save money in her rice container? Whenever she could, she would keep a small amount safe somewhere for rainy days.

Women have always been excellent financial planners. However, there is a considerable gap in the technical financial knowledge between men and women. In fact, more than 90% of women in India, do not actively seek financial knowledge. 

It’s time to take it up a notch, ladies! Reading financial news, investment/personal finance blogs, or reaching out to financial advisors can be your next step.

Plan for your and your family’s financial security and well-being. Keep up with your expenses and taxes every year. Invest whenever you can. 

If you are ready to strengthen your investment portfolio, get in touch with our financial advisors. Evaluate your portfolio and rule your finances like a boss. 

Keeping track of finances is the most crucial aspect of building wealth for the future. 

You can surely do it on your own until your financial instruments grow in every possible direction. Your family expands, your needs and wants increase, and your liabilities take a different turn. 

And when that happens, you are going to need a trustworthy and knowledgeable financial advisor. 

Financial Advisors can understand YOUR financial goals to give you the right advice. 

You need a financial advisor for-

1. Creating a sustainable investment portfolio
2. Monitoring your investments and taxes
3. Tracking your expenses
4. Creating savings for Children’s Education/Wedding 
5. Emergency corpus building
6. Retirement Plan
7. Other liabilities

But the question is: How to select the right financial advisor? Whom can you trust with your wealth?

Not to worry. We have got you covered. Here’s what to look for in a financial advisor.

6 Things to Look for in a Financial Advisor

1. Look for Knowledge

Managing finance isn’t an easy thing. Even financial advisors learn from their mistakes as the market can be unpredictable.

When you look for a financial advisor, always check their knowledge and professional background. You can ask them for references and talk to their clients for more information.

Advisors who have handled finances through various cycles of the economy will bring more knowledge and experience to the table. Apart from the equity market cycles (which everyone seems to be savvy of, considering the information overload), an additional factor to consider is the number of interest rate cycles the advisor has worked through. Bonds and various debt instruments form an important fragment of asset allocation so it’s important to know whether your advisor is well-versed with the impact of interest rates on investments.

The market is full of financial advisors who can claim unrealistic outcomes, but you should evaluate realistic scenarios.

This brings us to the next point.

2. Realistic Expectations

No advisor can promise you how much returns you will get in a year. 

If an advisor is claiming 25-30% returns in a year, that’s a big NO right there. 

In fact, the word ‘Guaranteed Returns’ is not listed in an advisor’s dictionary.

Instead, experienced financial advisors will give you realistic estimates. They can plan your investment based on your risk profile, short and long-term goals, taxation, and insurance.

3. Proper Licenses

Financial advisors must have a license for the financial instruments they are selling. Certified Financial Planners (CFPs) or Chartered Accountants (CA) can guide you with finances and taxes.

If you want to invest in mutual funds, Advisors having a certificate from the Association of Mutual Funds in India are best suited. For insurance products, you may seek advisors who have a license from the Insurance Regulatory and Development Authority of India.

Always prefer working with certified financial experts. 

4. Financial Advisors Should Focus on Your Goals

You might have come across advisors who are more interested in selling financial instruments than to help you. That’s a red flag. 

Your financial advisor should focus on your financial goals, your investments, and your risk profile. The reason you are hiring a financial advisor is to simplify budgeting, taxation, insurance, long-term investments, and more.

If their focus is more on commission than on your needs, you shouldn’t proceed. Work with an advisor who is willing to listen to you before giving any sort of advice.

Tip See if the financial advisors have worked with clients who have similar interests/goals as you. Seek old track records of the advisor’s clients and their progress before making a decision.

5. Financial Advisors Must be Passionate About Wealth Management

Is your financial advisor talking passionately about current market scenarios and industry trends? If yes, you’ve got a good one there. 

Passionate financial advisors tend to constantly be in a learning and researching phase. They love to know what’s happening in the market. They gravitate towards finding out about new financial products, changes in law, new methodologies, and more.

Their passion becomes their primary gateway towards gaining relevant experience. If you want to know if the financial advisor is aware of new trends, ask them- “What’s new in the industry?” and see how they answer.

6. Communication Skills

It’s normal to be skeptical about letting someone else handle your finances. Trusting someone won’t come easily.

That’s why the communication skills of an advisor matter a lot. 

Your advisor should be able to explain finances in simple language. You should be aware of what’s going on with your investments. The advisor must be able to answer your queries and communicate all necessary details with you.

Often, you might come across advisors who talk a lot but offer no useful insights. 

An advisor should be able to share his/her experience, client success stories, suitable investment possibilities for you, and real-time market insights. And as an investor, you must seek this information as often as you can.

Keep communicating with the advisor to be on the same page. 

Conclusion

Everyone loves adulthood until the finances knock on your door with possibly ten arms. Then childhood seems much easier. You had nothing to worry about apart from your piggy bank. 

Remember though, your finances don’t need to be complicated. You can easily get everything sorted with the help of a financial advisor. 

Most of the time, people are not on-board with the idea of letting someone else manage their finances. But think of it as a collaboration. When you let an expert handle your money, you have a chance to earn more. Your money can bring more money with suitable investments.

But don’t forget to do your research as well.

You can analyze your portfolio for free at VNN Wealth to have a thorough glance at your investment. Once you have a clear idea of what you want to achieve in the next few years, our financial experts can guide you. You can explore all types of investment opportunities that can build wealth in the long run.

 

Have more queries regarding investments and finances? Contact us anytime.

A Public Provident Fund account (PPF) is a long-term tax-saving investment scheme that offers a fixed interest rate and tax-exempt returns. It’s a government-backed savings scheme with guaranteed returns.  

PPF account is as famous in Indian households as fixed deposit. Investors, regardless of their risk appetite, can keep aside a certain amount in a PPF account to gradually build wealth.

Some of the common reasons to have a PPF account are:

• Child’s higher education
• Buying a family home
• Weddings or other milestones
• Building retirement corpus

You can earn stable returns on your PPF account and take advantage of tax benefits under Section 80C. As of FY22, the interest rate on PPF is 7.1%. 

Before creating a PPF account, here are some things you need to know. 

What are the investment rules of the PPF account?

Any Indian resident can open a PPF account in a bank or a post office. You can only have one PPF account but you can transfer it from one bank to the other or to the post office if needed. 

You can also open a PPF account for your children and manage it until they are old enough. 

Once you open an account, you must invest between INR. 500 to INR. 1,50,000 in one financial year. Any amount beyond INR. 1,50,000 won’t be considered for tax savings under Sec 80C. 

Your investment will be locked for 15 full financial years and you will continue to earn compound interest on it. However, you can withdraw a partial amount in intervals of 5 years.

Let’s elaborate some more.

Top 4 Features of Public Provident Fund Account

1. Investment Amount

You need to invest anywhere between INR. 500 to INR. 1,50,000 in a financial year on a monthly, quarterly, or annual basis as you get up to 12 installments per year. There’s a small penalty if you miss an installment in a financial year. 

2. Investment Horizon

PPF account has a tenure/lock-in period of 15 full financial years. This means- if you start your account on, let’s say, 1st Oct 2022, your 1st financial year will start from 1st April 2023. 

Yes, you will earn returns on the investment from 1st Oct 2022 to 1st April 2023. But the financial year will begin on 1st April 2023.

You can withdraw a partial amount (50% of the total available balance) only after the completion of 5 years. Until then, the investment will be locked. Though you can claim a loan against your PPF account.

3. Loan Against PPF Account

Since your amount is locked-in, you can apply for a loan against your PPF account.

There are two rules to claiming the loan:

• You can only request a loan from the beginning of the 3rd financial year to the end of the 6th financial year. 
• You will only be eligible for 25% of the amount from your PPF account calculated immediately preceding the year in which you are applying for a loan. 

The interest on this loan will be 1% + the PPF interest rate. If the PPF interest rate is 7.1%, the loan interest rate will be 8.1%.

4. Tax Benefits on Public Provident Fund Account

PPF investments up to INR. 1,50,000 are eligible for tax benefits under section 80C.

However, if you have any other investment under section 80C, then you may not be able to claim the tax benefit on PPF. 

If PPF is your only investment under Section 80C, then you can take advantage of Exempt-Exempt-Exempt (EEE) i.e. The amount invested in PPF, the interest earned, and the final corpus withdrawn at the time of maturity are all exempt from tax.

What Happens If You Choose To Extend the PPF Account After 15 Years?

After the full 15 financial years, you can either withdraw the full amount or extend the account in blocks of 5 years,

In that case, you will be able to withdraw the balance that was available before the extension was locked. So if you had INR. 30,00,000 after 15 years and you extend the account, you can only withdraw 30L. Any further investment will be locked. Also, you can only make one withdrawal in each financial year.  

Can You Terminate The PPF Account Prematurely?

In case you need emergency funds, there are 2 cases in which you can terminate the account.

1. For the medical emergency of a life-threatening disease of you or your parents/spouse/children.

2. For higher education of children.

How to Maximize The returns On Public Provident Fund Account?

There are 2 simple tips that can maximize your PPF account returns. 

1. Invest at the beginning of the year

If you invest a large amount once a year in your PPF account, we recommend doing it at the beginning of the year (Preferably before the 5th of April). 

Most people invest a large amount at the end of the financial year to get tax benefits. However, the interest on the amount is calculated throughout the year. You can take advantage of maximum interest if you invest when the financial year begins.

2. Before the 5th of each month

If you are planning to schedule monthly investments, prefer to do it before the 5th of each month. 

The balance considered for calculating interest on the PPF account is calculated on – the balance in your PPF account on the 5th day of the month and the last day of the month – whichever is lower.

For example, if your balance is INR. 2,00,000 and you invest INR. 50,000 on the 6th of a month, you will earn interest only on INR. 2,00,000 and not on INR. 2,50,000. But if you invest that INR. 50,000 before the 5th of that month, then your interest will be calculated on INR. 2,50,000.

Conclusion

Having a PPF account is a disciplined way of building wealth for the future. You can open an account online and keep transferring money into it. 

It’s a secure investment with stable returns and tax benefits. Continue keeping some money aside for the future and forget about it until maturity. By the time of maturity, you will have a large corpus ready.

Don’t forget to invest money in your PPF account either before the 5th of April each year or before the 5th of each month for monthly installments. That way, you will maximize the returns on your investment. 

 

To know more about long-term investments, give VNN Wealth experts a call or write to us. Get all your queries answered with a thorough portfolio analysis. 

What if you can get FD-like security but higher returns? 

Guess what? You absolutely can.

Corporate Fixed Deposits or Company Fixed Deposits offer all the FD features but with superior returns. You can invest in these FDs for a suitable tenure and earn desired returns by the end of the tenure.

Now, you must be wondering, are Corporate FDs safe? How does taxation work? How to invest in a corporate FD? 

You will find answers to all your questions throughout this article. Let’s dive into it.

 

What Are Corporate Fixed Deposits?

Corporate FDs are offered by Financial Companies or Non-Banking Financial Companies (NBFCs) such as Bajaj Finance, Mahindra & Mahindra, HDFC Ltd., etc. These companies raise funds from investors such as yourself and offer returns in exchange. 

You can create an FD with financial companies or NBFCs for a specific tenure with the promised rate of interest. It’s a safer investment option with promised returns.

If you create a cumulative FD, you will earn interest on the amount as well as the previously earned interest. Cumulative FD can exponentially build wealth over the years. 

 

4 Benefits of Investing In Corporate Fixed Deposits

     1. Superior Returns Than Bank FDs

Corporate FDs often deliver 1-2% higher interest rates than Bank FDs.

Here’s an example of various Bank FDs vs Bajaj Finance Corporate FD for a 5-year tenure.

 

FD rates for 5-year tenure as of Nov’22

     2. Guaranteed Returns

If the corporate/NBFC promised 7% returns by the end of tenure, you are guaranteed to receive it.

However, keep in mind that only RBI-approved and higher-ranked Corporate FDs are safe to invest in. RBI has defined a set of rules that a corporation has to follow in order to raise money via FDs. 

     3. Flexible Tenure

Corporate FDs offer a flexible tenure between 1-5 years. You can choose a tenure suitable for your financial goals. However, the interest rate may vary based on the tenure.

The higher the tenure, the higher the interest you will earn. 

     4. Lower Premature Withdrawal Period 

Both Bank and Corporate FDs have atleast 3 months penalty period for premature withdrawal as per RBI guidelines.

Corporate FDs often have a lower penalty period compared to bank FDs. 

 

4 Things to Consider Before Investing In Corporate Fixed Deposits

     1. Associated Risk

Not all corporate FDs are safe, at least not as safe as bank FDs. The performance of the Corporate/NBFC will affect the safety of the deposit.

With bank FDs, you get security on investments up to 1 Lakhs. Corporate FDs may not offer such security.

Invest only in companies that follow RBI guidelines, have public performance reports, and have higher ratings. This brings us to our next point. 

     2. FD Rating

Platforms like CRISIL often give ratings to various financial instruments. Corporate FDs also have ratings associated with them based on risk and performance.

Deposits with AAA to AA ratings are safer to invest in. Anything below the AA rating may have moderate to high risk. 

     3. Company’s Track Record

Before investing in Corporate FDs, you must check the track record of the company. You can either do your own research or seek help from financial advisors.

Financial experts at VNN Wealth are more than happy to help you select the right Corporate FD to invest in.

     4. Inflation Adaptability

Even though corporate FDs offer superior returns, those returns may not beat inflation. It all depends on the tax slab you fall under.

There is a chance that the returns after tax deduction might not align with inflation. In such a case, you must plan your investment horizon accordingly.

 

Taxation on Corporate Fixed Deposits

The interest earned via Corporate FDs comes under your annual income. You will have to pay tax on the interest earned according to your tax slab. So if you fall under the 20% tax slab, you have to pay 20% tax on the profits earned via corporate fixed deposits.

 

Ready To Invest in Company FD? – Here’s How.

Corporate FDs are best suited for investors who are seeking secure and higher returns. You will get at least a 1-2% higher interest rate with a Company Fixed deposit compared to bank FD.

You have the flexibility to choose a suitable tenure. It will not only diversify your portfolio but will act as a cushion to your overall portfolio during bear markets.

Similar to bank FD, you can create a Corporate FD online. You will have to visit the website of the Company/NBFC to apply for the FD.

After completing the application and submitting the KYC details, you will be able to invest in the FD.

You may also like- FD vs Debt Funds: Where to Invest?

 

What’s the first thing you do when you wake up? You check your phone.

Be it social media, news apps, or finance, every other field is dominated by technology. 

Not only millennials or Gen-Z, almost every generation relies on smartphones for day-to-day activities.

Fintech apps are no surprise in a world where everything is digital. Robo advisory, for instance, allows anyone to automate an investment portfolio. Doesn’t that sound awesome?

 

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But is it really reliable?

The questions everyone should be asking right now are- 

1. Can Robo Advisors handle complex investment portfolios? 

2. Is it safe to trust an AI algorithm that runs on limited data? 

3. And does Robo Advisory guide you when the market falls and panic strikes?

Let’s answer each question, shall we?

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What Is a Robo Advisor?

A Robo-advisor is an algorithm-based automated financial advisor that manages investments and provides investment advice with little to no human intervention.

They usually work by asking a series of preset questions such as goals, risk appetite, income, assets, liabilities, etc. through questionnaires to understand investment behavior and accordingly make investment recommendations. 

This software enables buying and selling of assets and the periodic rebalancing of portfolios.

However, in reality, Indian Robo-advisor apps do not depend on self-learning algorithms but instead are quite simplistic wherein a human consultant codes certain algorithms based on pre-set questions and answers, to understand investor behavior.

 

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Types of Robo Advisors

 1. Simple Robo-Advisors

Simple Robo-advisory asks a set of questions much like a quiz to understand the investment’s risk preference, goals, net worth, liabilities, time horizon, etc. 

These are more like surveys with options to pick from 3-4 different choices of answers and once the investor makes his pick, he’s then recommended certain investment products to invest into. 

Most Indian advisor platforms use this method for providing investment recommendations and according to Indian rules and regulations, one has to initiate transactions on their own.

 

2. Evolved Robo-Advisors

Evolved Robo-advisors focus on artificial intelligence and data learning to provide investment advice. 

These robots basically dig deep into your financial transactions and assess the spending patterns on your credit/debit card as well as banking transactions, rather than focusing on the claims you’ve made by simply picking one of the few available options.

This method helps to fill gaps by having verified information on what you’re spending, any liabilities you may have failed to remember as well as any other patterns related to your decision-making. 

These mathematical algorithms then use this available data to help provide tailor-made solutions for each individual.

They also allow you to permit auto-pilot mode, which enables auto buying and selling of assets on your behalf.

However, the concept of Robo Advisory in its current form i.e. simple Robo advisors is not new to India. These platforms are more Do It Yourself (DIY)/ Digital platforms.

Platforms like ICICI Direct have existed for almost 2 decades now with basic DIY functioning. We personally believe that the current platforms addressing themselves as Robo advisors, is mostly a marketing gimmick, burning private equity money with hardly a new invention at hand.

In fact, even independent human financial advisors use similar digital platforms to manage your portfolio and at the same time let you log in, filter, select, buy/sell and track funds on your own.

The big difference is that there is an experienced human being handling your investments for you using technology versus a call center executive or a sales executive with hardly any experience in wealth management and a pre-written script on the call trying to add the human touch to these Robo advisory platforms.

When there’s an option for both digital and human interactions, why limit your possibilities with Robo advisors?

 

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Why Are Investors Trusting Human Advisors Over Robo- Advisors?

Being able to achieve financial goals via online platforms sounds enticing. Then why are many investors still reluctant about Robo-Advisors?

A study published on ResearchGate compared the perception of Human vs. Robo advisors. In the study, the respondents were randomly assigned to human advisors (both high/moderate experience) and Robo advisors. 

The data was gathered from respondents based on various parameters and it showed the following results:

1. The Trust factor of various advisors was measured on a scale of 1-100. Expert Advisors scored 68.14 whereas Novice advisors and Robo advisors scored 61.24 & 52.25  respectively.

2. Additionally, the Performance Expectancy was measured on a scale of 1-7. Here again, Expert advisors scored 5.39 while Novice advisors and Robo Advisors scored 4.92 & 4.73.

3. Furthermore, the Intention to Hire was measured on a scale of 1-7. Based on the above findings, it’s no surprise that Expert advisors scored the highest, which is 5.33. Novice advisors and Robo advisors scored 4.98 & 4.81 respectively.

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Findings:

From the table below, you can see that there’s not much difference between Novice advisors and Robo advisors on the basis of performance expectation, and intention to hire. Yet, respondents preferred Novice advisors over Robo advisors. 

Expert advisors clearly scored the highest due to their knowledge and ability to build trust by maintaining transparency. 

After analyzing data on various factors such as trust, performance expectation, and intention to hire, it is evident that most respondents chose experienced human advisors over Robo advisors.

 

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(Image Source- researchgate.net)

 

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Another study released by Vanguard found that many investors prefer human advisors to tackle complex portfolios. Especially when the markets are volatile, panic-struck people craved human connection instead of an algorithm.

The Vanguard Study also revealed that – 93% of investors working with human advisors said they wouldn’t switch to Robo advisors. On the other hand, 88% of Robo-advisor users said they would consider switching to human advisors for comprehensive portfolio analysis.

 

 

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(Image Source- Vanguard’s Study on Robo or Human Advisors?)

It’s clear that – Most investors are trusting human advisors more than Robo advisors. 

Robo advisors may be suitable to manage small investments. But when it comes to real market scenarios, most people would rather go with human advisors.

Let’s dig deeper into the topic.

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Why are Robo Advisors not trusted by many investors?

As an investor, you must be aware of realistic market scenarios. The market can change quite often, thereby creating uncertainty.

Even though Artificial Intelligence can do unbelievable things, there are certain things that Robo-Advisors might not be able to do.

 

1. Flexibility and Personalization

Robo-advisors do claim flexibility and personalization, but there are limitations to it. The algorithm molds itself based on the questionnaire you answer.

That means the recommendations are suitable for investors like you- not you in particular. 

Besides, most investors are not fully aware of their personality when they answer these quizzes. They may get confused and select unsuitable options.

In our experience, while answering such quizzes, most people often select options based on what they want to be and not based on who they really are.

For example, the majority of investors think they have an aggressive risk appetite. They assume that they can invest aggressively without getting intimidated by market volatility, but that’s not always true. Many investors panic-sell when their portfolio falls.

 

2. Robo Advisors Do Not Have Feelings

Why would feelings matter, you may ask?

Well, you are human and you have feelings. You are most likely to panic when the market falls and would need someone to talk to. Someone with experience, who handles market volatility. 

Robo-advisors have no idea what to do when investors push the panic button. They have no feelings, hence, they cannot give real-time advice.

You have no one to manage your investments and your feelings on digital platforms. 

On the contrary, human advisors can identify gaps in your portfolio. Also, They can assist you during market volatility, help you understand your risk profile better, and guide you to make suitable investments.

 

3. Limited Human Intervention

Who would you rather call? An experienced human advisor or a sales executive with limited knowledge? 

Some Robo-advisors have the option to talk to sales executives or communicate with a chatbot. Both options, even though convenient, aren’t logical.

A sales rep or a chatbot cannot give you ‘real’ advice. They are following a script given to them. So while they may have answers to your basic questions, they cannot tackle complex portfolios.

There’s very limited human intervention, which can endanger your financial goals.

 

4. Algorithm Bias

Robo-Advisor algorithms only follow implicit values provided to them. It’s a piece of code designed after gathering limited and in some cases, biased data.

There are many reasons why an algorithm might reflect biased responses. Social agendas, financial revenue-sharing schemes (kickbacks), conflicts of interest, and many more.

Basically, the algorithm will only respond in a way it has been trained to respond. 

The bottom line is Robo-advisors can kickstart your investment portfolio. You can create a simple portfolio with a small amount of investment within a few clicks. But when your investment portfolio grows and risk profiles expand (which is inevitable), these digital platforms cannot guide you any further. That’s why most investors even today, seek professional financial advice from humans, most of whom, are anyway equipped with digital platforms to enable ease of transaction.

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Why Should You Choose Human Advisory Services?

1. In-Person Interactions

The major difference between Robo Advisory and Human Advisory is the conversation. Sure, Robo advisors listen to you too, but to a certain extent.

When you seek answers to complex financial queries, only human advisors can help you.

Human advisors can align your portfolio with your long-term financial goals. They can talk to you whenever you want any financial advice.

 

2. Sensible Recommendations and Credible Results

No advisor- neither human nor robot, can guarantee higher outcomes. In fact, they are not supposed to create an illusion of higher returns when it is clearly uncertain.

Nevertheless, human advisors can give you sensible recommendations which can deliver credible results.

For example, we believe that the stock market follows the economy. So, in the long run, as the economy grows, so will your investments, irrespective of everyday market volatility. All you have to do is wait, have patience, and not panic-sell anything. 

These and more such recommendations may not be possible with Robo-advisors who may recommend a sell call in a falling market, when a stop-loss is triggered based on the algorithmic code. Thus, making you book a loss, which may have been avoided if you would have stayed invested.

 

3. Trust and Transparency

How much would you trust a predefined algorithm? At some point, it ought to deliver inconsistent results thereby losing your trust.

You don’t know what’s going on at the backend of Robo advisors. There’s no transparency. 

Human advisors have nothing to hide from you. They can analyze your portfolio in front of you. They can pinpoint gaps and assess risk profiles. At the end of the day, you trust a person who talked to YOU about YOUR portfolio.

If you have any financial queries about your investment portfolio, VNN Experts are just a call away. Give us a call at +91 8408020995 to plan long-term financial goals.

 

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Key Takeaway

If you are a new investor and would like to kickstart your investment portfolio, Robo-advisory might seem like an easy choice. However, relying completely on the algorithm will not help you achieve your financial goals.

There will come a time when Robo-advisors won’t address all of your questions. There’s a gap between what an algorithm can do, what’s really happening in the market, and your evolving risk appetite, which requires frequent portfolio reviews.

That’s why the data in the studies above show that many investors prefer to communicate with Human Advisors. 

Human advisors can offer you suitable recommendations. You can communicate with them effortlessly and seek advice that aligns with your long-term goals. 

You may want to read these 6 tips before choosing the right financial advisor for you.

Now, if you already have signed up for Robo-advisory, do not worry. You still have the opportunity to seek professional advice. 

At VNN Wealth, we offer a thorough analysis of your investment portfolio and risk profile and help you set financial goals. Give us a call or send us an email whenever you are ready to take your investments to the next level.